Businesses limit investment as confidence slides

Expectations among businesses for investment growth remain well below the rates of 2014 and 2015, according to the latest Institute of Chartered ­Accountants in England and Wales Business Confidence Monitor.

The membership body’s research found that current levels of investment showed no signs of picking up, along with staff development budgets, which were growing at a much slower pace than revenues.

The lack of investment was blamed on the fact that confidence among firms had fallen back into negative territory, reversing the gains made in the second quarter of the year. The index fell from 6.7 in the second quarter to -8 in the third quarter of the year, similar to levels at the beginning of 2017.

Businesses are adopting a cautious approach due to the snap general election and the slow progress of EU negotiationsCredit:
PA

The snap general election, the threat of a hung parliament and the hesitant progress of negotiations with the EU mean businesses are now adopting a more cautious approach, the report found. Matthew Rideout, director of business at the ICAEW, said the fall back into negative territory was “not unexpected”.

“The industrial strategy has been lost in the void, coupled with no clear signal towards post-Brexit policy,” he said. “As a result, businesses cannot see through this haze of uncertainty and are struggling to look further than the end of the next quarter in terms of their decision making.”

He urged businesses to invest in ­talent and new products in order to ­position themselves to take advantage of new trading opportunities, and said the Government should make transitional arrangements for Brexit clear so companies could start planning.

“They need to be planning now and cannot wait until early 2019 to find out,” he added.

The study also predicted that household incomes were likely to continue to be squeezed as businesses looked to control overall cost rises by holding wage growth to a rate below inflation. It said that the depreciation in the value of sterling had not led to faster growth in exports, although overall growth had been maintained.